Let me revise to properly reflect your direct perspective in those final points:
1. While mandatory joint ventures can theoretically assist in national technology upgrading, their role in explaining China's current corporate leaders is questionable.
2. The success stories of firms like CATL, BYD, Huawei, and Deep Seek seem to follow more conventional paths to technological advancement. CATL, for instance, acquired technology through straightforward means - licensing from American universities and recruiting experienced Japanese engineers who faced career stagnation in their home country. This hardly fits the narrative of state-directed technology acquisition.
3. China's current competitive advantage in electronics manufacturing did receive state support, but primarily through broad-based policies like Free Trade Agreements rather than targeted industrial policy. The sector's development appears relatively market-driven.
4. The limitations of state-directed development become apparent in sectors like semiconductors and aerospace. Despite earlier entry into semiconductor manufacturing than Taiwan, China still lags behind. In aerospace, China hasn't matched even Brazil's capabilities, let alone Western leaders.
5. You're probably more knowledgeable than me on this subject. Perhaps the companies I mentioned did use the joint strategy to acquire technology by leveraging their relationship with government. More specific case studies would be much appreciated.
6. Also I think that the western firms are not being arrogant in thinking that the Chinese can't copy them that well. I'm from Bangladesh and many international banks have been operating in the country since the British Raj days and currently largely employ locals. However these international banks are still far more productive than local private banks.
Why do foreign companies agree to work with China?
Because if they didn't, their competitor would and tech transfer would have happened AND they would have lost out on profit.
This is the fundamental difference between US's free market capitalism and China's state capitalism.
Imagine if each Chinese company had been allowed to decide what stake to offer in a joint venture, one company would offer 49%, then the next would give 55%, then 60%, then 80%. Instead, the Chinese state stepped in and said the maximum stake you're allowed to offer is 49%, every Chinese company can point to that and say my hands are tied.
What about the reverse? Could American companies have recognized the looming threat of Chinese cars and all the big mfgs sat down together and agreed upon what tech not to transfer to China and how they would punish each other if they defected? Actually, no. Even just sitting down in a room together to discuss this would have been illegal as this is collusion and a violation of the tenets of free market capitalism. The only way company CEOs can legally sit down and talk about any issue is if the government invites them to sit down and agree together, with the force of law backing it. And the US government had no appetite or capability to do this during the bulk of China's rise.
After decades of poo-poohing industrial policy as a concept, America is now finally on the industrial policy bandwagon except not acknowledging that it took China decades of lessons before learning how to do industrial policy semi-competently and expecting it to be a slam dunk from the start. As soon as the first Solyndra-style debacle happens, America will back out of industrial policy again for another few decades.
It’s also happening in the Pharmaceutical world; Chinese companies accounted for fully one third of all new in-licensed drugs in 2024. This is a function of a few factors including China’s ability to initiate and execute First in Human clinical trials at a far greater pace than in the West; The relative lack of capital Chinese pharma companies; and the fact that many of these drugs are cheaper (in terms of upfront costs) than in the West. To emphasise, these are new drugs as opposed to generic copy cats.
Regarding AMC's joint venture, the book Beijing Jeep by Jim Mann is well worth a read if interested in what happened behind the scenes as well as broader politics of the time. There's also a lot of amusing anecdotes like AMC's war on office napping:
"To the Chinese office workers at the jeep factory, the beds were merely a convenience and, indeed, a symbol of prestige. Out on the assembly line, workers who wanted to take a xiuxi had to improvise and find a bench or some space on the floor. To the newly arrived Americans, however, the beds, locked doors, and covered windows were symbols of indolent management.
Soon after his arrival at the factory, MacGregor, the ranking AMC staffer in Beijing, ordered that all the beds be removed. Nothing happened. Finally MacGregor took matters into his own hands. He ran into one Chinese office and began hauling out the bed. Chinese officials held him back but over the next few days relented and removed all the beds on their own."
Let me revise to properly reflect your direct perspective in those final points:
1. While mandatory joint ventures can theoretically assist in national technology upgrading, their role in explaining China's current corporate leaders is questionable.
2. The success stories of firms like CATL, BYD, Huawei, and Deep Seek seem to follow more conventional paths to technological advancement. CATL, for instance, acquired technology through straightforward means - licensing from American universities and recruiting experienced Japanese engineers who faced career stagnation in their home country. This hardly fits the narrative of state-directed technology acquisition.
3. China's current competitive advantage in electronics manufacturing did receive state support, but primarily through broad-based policies like Free Trade Agreements rather than targeted industrial policy. The sector's development appears relatively market-driven.
4. The limitations of state-directed development become apparent in sectors like semiconductors and aerospace. Despite earlier entry into semiconductor manufacturing than Taiwan, China still lags behind. In aerospace, China hasn't matched even Brazil's capabilities, let alone Western leaders.
5. You're probably more knowledgeable than me on this subject. Perhaps the companies I mentioned did use the joint strategy to acquire technology by leveraging their relationship with government. More specific case studies would be much appreciated.
6. Also I think that the western firms are not being arrogant in thinking that the Chinese can't copy them that well. I'm from Bangladesh and many international banks have been operating in the country since the British Raj days and currently largely employ locals. However these international banks are still far more productive than local private banks.
Why do foreign companies agree to work with China?
Because if they didn't, their competitor would and tech transfer would have happened AND they would have lost out on profit.
This is the fundamental difference between US's free market capitalism and China's state capitalism.
Imagine if each Chinese company had been allowed to decide what stake to offer in a joint venture, one company would offer 49%, then the next would give 55%, then 60%, then 80%. Instead, the Chinese state stepped in and said the maximum stake you're allowed to offer is 49%, every Chinese company can point to that and say my hands are tied.
What about the reverse? Could American companies have recognized the looming threat of Chinese cars and all the big mfgs sat down together and agreed upon what tech not to transfer to China and how they would punish each other if they defected? Actually, no. Even just sitting down in a room together to discuss this would have been illegal as this is collusion and a violation of the tenets of free market capitalism. The only way company CEOs can legally sit down and talk about any issue is if the government invites them to sit down and agree together, with the force of law backing it. And the US government had no appetite or capability to do this during the bulk of China's rise.
After decades of poo-poohing industrial policy as a concept, America is now finally on the industrial policy bandwagon except not acknowledging that it took China decades of lessons before learning how to do industrial policy semi-competently and expecting it to be a slam dunk from the start. As soon as the first Solyndra-style debacle happens, America will back out of industrial policy again for another few decades.
The east and the west - in particular - succumbed to a faustian bargain with China! But so did the Japanese and the Koreans. True?
It’s also happening in the Pharmaceutical world; Chinese companies accounted for fully one third of all new in-licensed drugs in 2024. This is a function of a few factors including China’s ability to initiate and execute First in Human clinical trials at a far greater pace than in the West; The relative lack of capital Chinese pharma companies; and the fact that many of these drugs are cheaper (in terms of upfront costs) than in the West. To emphasise, these are new drugs as opposed to generic copy cats.
Poor thinking like this is what made the west weaker.
The west had a 100 year advantage in tech, manufacturing and science over China. And yet, they lost.
The analysis here is very weak. Forgot concepts like comparative advantage. And some good math like game theory.
The only tools used here are frustration and anger.
Very poor analysis. This is not how you find solutions to your problem.
Regarding AMC's joint venture, the book Beijing Jeep by Jim Mann is well worth a read if interested in what happened behind the scenes as well as broader politics of the time. There's also a lot of amusing anecdotes like AMC's war on office napping:
"To the Chinese office workers at the jeep factory, the beds were merely a convenience and, indeed, a symbol of prestige. Out on the assembly line, workers who wanted to take a xiuxi had to improvise and find a bench or some space on the floor. To the newly arrived Americans, however, the beds, locked doors, and covered windows were symbols of indolent management.
Soon after his arrival at the factory, MacGregor, the ranking AMC staffer in Beijing, ordered that all the beds be removed. Nothing happened. Finally MacGregor took matters into his own hands. He ran into one Chinese office and began hauling out the bed. Chinese officials held him back but over the next few days relented and removed all the beds on their own."
Looks like Ken Wilcox, the SVB guy, was on a podcast recently. Here's link to the youtube video: https://youtu.be/1hT70q24-KY?si=CNw-F4nlbPEdZCmy
Interesting article.
I write about this specifically as it relates to commercial aviation and COMAC’s C919 here:
https://open.substack.com/pub/thestupideconomy/p/the-c919-a-masterclass-in-technology?r=i7v1h&utm_medium=ios